According to an industry group, the NHS could spend billions more on medicine if its defacto tax on generic drugs discourages manufacturers from launching cheaper alternative products in the UK.
The British Generic Manufacturers Association stated on Monday that the voluntary scheme of branded medicine pricing and access (Vpas), would reduce competition in the market for non-patent medicines delivered in infusions instead of pills.
The warning is the latest in a heated debate between the UK government and drug companies over how much money the NHS will pay for drugs. At the same time, the UK health system is struggling with financial pressures and a shortage of staff as well as an unprecedented backlog of routine hospital treatments.
In the next five-year period, more biologic drugs than ever will lose their patent. Biosimilars will be the first competitors for 85 medicines including blockbusters like Keytruda, a cancer treatment. The NHS should be able to save a lot of money because the prices are 72 percent cheaper than the patent-protected versions in the UK.
According to research commissioned and conducted by Europe Economics and RFW Associates – two consulting firms – the health service may lose up to £100mn a month for every company that is discouraged from launching a new biosimilar. This figure could rise to £250mn if there are two companies who fail to enter the market.
Taxes on drugs have risen from 5% of the NHS bill for eligible medications a few years ago to 26.5% this year. It was designed to keep the rise in the NHS drug bill at 2% per year over the last five years. Drugmakers who choose to leave the voluntary scheme will be charged the higher statutory rate.
Celltrion, a South Korean company, has already begun to withdraw from the UK its generic version of breast cancer medication. The company claims that the levy made the product lose-making.
Accord, one the largest suppliers of drugs to the NHS, announced on Monday that they were considering removing products from the UK or not launching any at all due to the tax.
Mark Samuels, chief executive of the BGMA, said that any revenue received by the health service from Vpas over the next few years will be more than offset due to higher prices resulting from less competition.
We all see in the news each day the NHS’s finances and its need for additional funding to pay salaries and provide services. “Savings on biosimilars are extremely important to the NHS”, he said.
The NHS and drugmakers are currently negotiating a five-year agreement on the price of medicines. These talks should be concluded in the coming months.
The UK has been criticized by pharmaceutical companies for paying less for their products than other countries. But in May, Jeremy Hunt said that there is no “magic wand” for tackling the financial pressures on the NHS.
Generic drugmakers lobby for their branded drugs to be taxed lower or excluded from Vpas.
The Medicines and Healthcare Products Regulatory Agency requires that off-patent versions that are in the form of complex injections have their own brand, so that doctors can differentiate.
Biosimilars, despite being much cheaper, are now subject to Vpas.
Accord produces biosimilars that are used to treat various types of cancer. Paul Tredwell, executive vice-president of Accord Pharmaceuticals, said that the rising drug tax was “the number one issue that dictates our commercial strategy”.
He said: “We have to carefully consider whether we are able to continue to supply our entire portfolio of products, as well as future biosimilar launches in the UK.”
The Department of Health and Social Care stated that the current scheme is expected to save NHS 7bn PS by the end of this year. “This will provide value for taxpayers, while also providing investment for NHS Services and supporting innovation and the successful life sciences industry within the UK.”
The BGMA welcomed the new pricing approach it proposed for off-patent drugs in the statutory scheme.